Tennessee Life & Health Insurance Exam — All Questions
412 questions
In an executive bonus (Section 162) plan, the employer:
- a.Owns the life insurance policy outright and names itself as the beneficiary, while the executive simply agrees to be the insured person
- b.Pays a bonus, deductible to the employer and taxable to the executive, that the executive uses to pay premiums on a policy they own✓
- c.Provides no real benefit to the executive
- d.Cannot deduct any part of the arrangement
In a Section 162 executive bonus plan, the employer pays a deductible bonus (taxable to the executive) and the executive owns the policy and pays its premiums. The employer does not own the policy.
A split-dollar life insurance arrangement is:
- a.An agreement in which an employer and employee share the costs and benefits of a life policy, such as premiums, cash value, and death benefit✓
- b.A type of deferred annuity
- c.A term insurance rider that an employer attaches to the executive's personal life insurance policy in order to provide extra temporary death benefit at a low cost
- d.A government insurance program
Split-dollar is an arrangement between an employer and employee (or two parties) to split the premium costs and policy benefits of a life policy. It is not a government program, annuity, or rider.
Which authority regulates the business of insurance and issues resident insurance producer licenses in Tennessee?
- a.A self-regulatory body run by the insurance companies
- b.The U.S. Department of Insurance
- c.Tennessee Department of Commerce & Insurance✓
- d.The National Association of Insurance Commissioners (NAIC)
In Tennessee, insurance is regulated by the Tennessee Department of Commerce and Insurance (TDCI). The NAIC is a coordinating body of state regulators, not a licensing authority, and there is no federal 'Department of Insurance' that licenses producers. Insurance is regulated at the state level.
A person who wants to sell both life insurance and health (accident and sickness) coverage in Tennessee generally needs:
- a.A separate business corporation license for each product
- b.An insurance producer license with the life and the accident and health (or sickness) lines of authority✓
- c.Only a federal securities registration
- d.A property and casualty producer license
Tennessee, like other states under the Producer Licensing Model Act, issues a single insurance producer license to which specific lines of authority attach. To sell life and health products a producer adds the life line and the accident and health (accident and sickness) line. Property and casualty is a different line for different products.
Before a licensed Tennessee producer may transact business on behalf of a particular insurer, what generally must happen?
- a.The producer must post a personal surety bond with the state treasurer
- b.The producer must be related to an officer of the insurer
- c.The insurer must appoint the producer, filing notice of the appointment with TDCI✓
- d.Nothing further is required once the producer holds a license
Holding a license lets a person act as a producer, but to represent a specific company that insurer must appoint the producer, and the appointment is filed with TDCI. A producer may hold appointments with several insurers at once. The appointment is how the insurer accepts responsibility for the producer's acts.
What is the general continuing education (CE) expectation for a resident life and health producer renewing a Tennessee license?
- a.No continuing education is ever required
- b.One hour of CE for the life of the license
- c.Roughly 24 hours of approved CE each two-year license term, including a required ethics component✓
- d.A full re-taking of the state licensing exam at every renewal
Tennessee follows the common state pattern of requiring approximately 24 hours of approved continuing education during each two-year license term, including a required ethics portion, plus payment of the renewal fee. Producers should confirm the current hour and ethics requirements with TDCI, because the exact figures are set by rule and can change.
Tennessee requires individual life insurance policies to include a 'free look' (right to examine) provision. What does this give the policyowner?
- a.The right to change the insured person at any time
- b.The right to borrow the full face amount immediately
- c.A guarantee that premiums can never increase
- d.A period (commonly at least 10 days) after delivery to return the policy for a full refund of premium✓
A free-look or right-to-examine provision lets the policyowner return a newly delivered individual life policy within a stated period, commonly at least 10 days, and receive a full refund of premium. Replacement transactions often carry a longer review period. The provision protects consumers who change their mind after reviewing the actual contract.
How may a Tennessee producer refer to the state's life and health insurance guaranty association when making a sale?
- a.As the main reason to buy from a particular insurer
- b.As a guarantee that the buyer can never lose any money
- c.As a substitute for checking an insurer's financial strength
- d.Not at all as a sales inducement — using the guaranty association to sell insurance is prohibited✓
The Tennessee Life and Health Insurance Guaranty Association is a safety net that pays certain covered claims if a member insurer becomes insolvent, subject to statutory dollar limits. State law prohibits producers and insurers from using the guaranty association's existence as an inducement to buy insurance or in advertising. It is a backstop, not a selling point.
A Tennessee producer is replacing a client's existing life insurance policy with a new one. What does the state's replacement regulation generally require?
- a.That the client waive the free-look period on the new policy
- b.Following replacement disclosure rules — giving the client required notice/comparison information and notifying the existing insurer✓
- c.Nothing special, because replacement is treated like any new sale
- d.That the producer keep the transaction secret from both insurers
Replacement regulations (based on the NAIC model adopted in Tennessee) protect consumers by requiring the producer to provide notice and comparison information, obtain required signatures, and see that the existing insurer is notified so it can respond. The rules guard against unnecessary or misrepresented replacements that could harm the policyowner.
A Tennessee producer offers a prospect part of the first-year commission as cash back if the prospect buys a policy. This practice is:
- a.Allowed if the amount is small
- b.Prohibited as unlawful rebating✓
- c.Allowed if disclosed verbally
- d.Required to be reported but otherwise legal
Rebating — giving a portion of the premium or commission, or any valuable consideration not stated in the policy, as an inducement to buy — is prohibited under Tennessee's Unfair Trade Practices Act. It is barred because it can create unfair discrimination between policyholders who are otherwise in the same class.
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Under Tennessee insurance law, which conduct best describes 'twisting'?
- a.Selling policies to two members of the same family
- b.Charging different premiums based on the insured's actual age
- c.Using misrepresentation or incomplete comparisons to persuade a policyholder to drop one policy and buy another✓
- d.Submitting an application electronically
Twisting is inducing a policyholder to lapse, surrender, or replace an existing policy through misrepresentation or misleading comparisons. It is a prohibited unfair trade practice in Tennessee because it can leave the consumer worse off — for example with new contestable and suicide periods and fresh acquisition costs.
A Tennessee producer collects a premium from a client. Ethically and legally, how must the producer treat that money?
- a.As money that may be loaned to other clients
- b.As funds held in a fiduciary capacity that must be remitted to the insurer and not commingled or used personally✓
- c.As a gift the producer may keep if the policy is not issued
- d.As the producer's own income to spend immediately
Premiums a producer collects belong to the insurer or the client, not the producer. Tennessee treats this as a fiduciary duty: the funds must be accounted for and remitted properly, and must not be commingled with personal funds or converted. Misappropriating premiums is grounds for license discipline and can be a crime.